RE: Electricity record profits19 Aug 2022 09:47
"Drought Is Driving European Energy Markets Toward Disaster
By Irina Slav - Aug 17, 2022, 5:00 PM CD
• A combination of record-breaking natural gas prices, rising coal prices, and droughts across Europe are putting the EU electricity market under massive pressure.
• French utility EDF has had to significantly reduce the capacity utilization rate of its nuclear power plants due to reduced water availability for cooling.
• Hydropower capacity has also fallen due to drought, while low water levels in the Rhine mean shipping volumes are falling too.
... have combined to push electricity contracts in the EU to record highs as uncertainty about the coming winter deepens.
Reuters reported earlier this week that a number of power forward contracts traded in the EU hit highs because of what increasingly looks like a perfect energy storm, affecting every energy source in one way or another.
... Meanwhile, in Germany, wind output is low, and so is the water level of the Rhine—a key transport route for things like coal, for example. Germany's economy is quite dependent on this crucial shipping corridor, but when the water level is critically low, shippers simply cannot load the usual volume of cargo, meaning that coal and other commodities are reaching their destinations in smaller mounts and more slowly.
The drought is also affecting hydropower output, adding to worries about future supply. Because of the drought, Norway, which generates more than two-thirds of its electricity from hydropower, announced it would curb electricity exports, threatening supply for other European countries at the worst possible time.
... Meanwhile, Gazprom's gas flows to Europe remain much lower than usual, with the Russian state major warning this week that gas prices on the spot European market could top $4,000 per 1,000 cubic meters. Recently, spot prices broke the $2,500 barrier.
"European spot gas prices have reached $2,500 (per 1,000 cubic meters). According to conservative estimates, if such a tendency persists, prices will exceed $4,000 per 1,000 cubic meters this winter," Gazprom said.
The European Union has been quick in switching from Russian gas to U.S. LNG amid the Ukraine crisis, but speed has not been enough: U.S. LNG export capacity is not limitless, and producers also have other clients, in Asia. As the winter season approaches, Asian buyers have become more willing to pay hefty premiums for any LNG, which has intensified competition for a limited number of LNG tankers.
... And it could yet get worse as the oil embargo against Russia kicks in at the end of the year.
Analysts have warned that this could lead to higher prices for oil. This will, in turn, add to upward electricity price pressure due to the switch from gas to oil some utilities in Europe have implemented to shield themselves from prohibitive gas prices."
https://oilprice.com/Energy/Energy-General/Drought-Is-Driving-European-Energy-Markets-Toward-Disaste
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